Gildan shares plunge as clothing maker misses estimates, lowers full-year forecast

Canadian clothing maker Gildan Activewear Inc. GIL-T lowered its financial forecast for the year and pulled its longer-term targets as it deals with a sudden slump in its business that it blamed on higher borrowing costs and inflationary pressure.

The manufacturer of t-shirts and fleece hoodies also missed analyst estimates for its latest quarter. The developments crushed Gildan shares, with the company shedding one quarter of its market value in mid-morning trading on the Toronto Stock Exchange.

“Our results this quarter did not meet our expectations, reflecting a more subdued demand environment and near-term challenges in parts of our business across both wholesale and retail,” Gildan chief executive Glenn Chamandy said in a statement. “The demand recovery we had anticipated has not materialized as expected.”

Back at the helm of Gildan after a group of rebel shareholders reversed a move by the board to oust him in 2023, Mr. Chamandy now faces a series of challenges that are hitting the business. They include a volatile U.S. tariff environment, a short-seller report in June alleging Gildan is inflating sales, and shrinking demand for its products – all as the company digests the takeover last year of rival Hanesbrands Inc.

Gildan manufactures its clothing from bases in Central America and other regions and sells undecorated apparel in bulk to distributors and screen printers. It also sells branded clothing and innerwear to department stores and other retailers under labels such as Hanes, Playtex and American Apparel.

The company continues to generate strong free cash flow and remains committed to returning capital to investors, Mr. Chamandy said in a release reporting third-quarter earnings on Thursday. But its near-term prospects have darkened.

Montreal-based Gildan reported net sales from continuing operations of US$1.47-billion for the quarter, lower than its guidance of US$1.65-billion. Adjusted diluted earnings per share came in at US$1.54 versus the US$1.57 analysts had been expecting.

The company pushed its financial projections lower for the full year, saying it now expects revenue to come in at a minimum of about US$5.4-billion, down from a low-end estimate of US$6-billion previously. Adjusted earnings should come in at a minimum of US$3.70 per share compared to its previous estimate of US$4.65, it said.

“Since the company reported its second quarter results, the macroeconomic environment has changed rapidly, with rising interest rates and persistent inflation in household essentials weighing on demand for apparel by end consumers,” Gildan said in its release.

The company withdrew its previous financial objectives for the 2026 to 2028 period, which it confirmed in February. It said the underlying business remains strong and that it would provide an updated outlook in the spring of next year.

Prior to the results, the market had expected macroeconomic pressures to weigh on demand, Desjardins analyst Chris Li said in a note. But it appears changes in the past three months have been “much more severe than anticipated and are weighing on consumer demand for apparel,” he said.